Payment of Excess Expenses Incurred by Purchaser in Connection With the Redemption of Real Property Under I.R.C. Sec. 7425

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

[GL-520-87]

RIN 1545-AL20

Payment of Excess Expenses Incurred by Purchaser in Connection

With the Redemption of Real Property Under I.R.C. Sec. 7425

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: This document contains a proposed regulatory amendment

relating to the payment of excess expenses incurred by a purchaser at a

nonjudicial sale in connection with redemptions of real property by the

United States under Internal Revenue Code section 7425. The existing

regulations provide guidelines for submitting claims for excess

expenses incurred by a purchaser, or his or her successor in interest,

after a foreclosure sale and before redemption, but do not provide a

cutoff date for submission of claims for excess expenses. The intent of

the proposed regulations is to provide such a cutoff date. These

proposed regulations provide that when requested by the district

director, a purchaser at a nonjudicial foreclosure sale must submit a

written claim for excess expenses within 30 days of the request for

such claim to be considered. If, however, the purchaser does not submit

a claim at that time, but does incur excess expenses, the purchaser may

submit a claim within 30 days after the redemption. Failure to submit a

claim within that time period forecloses the right to do so.

DATES: Written comments and requests for a public hearing must be

received by July 22, 1994.

ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (GL-520-87), room 5228,

Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,

DC 20044. In the alternative, submissions may be hand delivered between

the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (GL-520-87),

Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,

Washington, DC.

FURTHER INFORMATION CONTACT: Robert A. Walker, (202) 622- 3640 (not a

toll-free call).

SUPPLEMENTARY INFORMATION:

Background

This document contains proposed regulations that would amend the

Income Tax Regulations (26 CFR part 301) under section 7425 of the

Internal Revenue Code (Code). The regulations would impose a time limit

within which a purchaser of real property at a nonjudicial sale may

submit a claim for excess expenses to the United States when it is

redeeming such real property. The United States will not consider any

claim made after expiration of the time limits.

Explanation of Provisions

Treasury Regulation Sec. 301.7425-4(b)(3)(ii) does not provide a

specific time period within which the purchaser at a nonjudicial

foreclosure sale may submit a claim for excess expenses after the

redemption. The proposed regulations clarify that claims for excess

expenses must be submitted within the time periods specified in the

regulations in order for the purchaser to be reimbursed.

The proposed regulations establish a 30-day limit after a request

is made by the district director for the purchaser at a nonjudicial

sale or his or her successor in interest to furnish a written itemized

statement of expenses in excess of income. Since excess expenses could

be incurred after a district director's request, a purchaser who fails

to submit a claim at this time may submit a claim within 30 days after

the date of redemption. These limits will allow the purchaser a

reasonable amount of time within which to determine the amount of any

excess expenses and to submit a claim to the United States. After the

expiration of the relevant time periods, the United States may

distribute all surplus proceeds associated with the sale of the

redeemed property unhindered by any possibility of a claim for excess

expenses made in the future when the surplus proceeds of sale are no

longer available to satisfy such a claim. Adding time limits will also

expedite the handling of redemption sales by earlier disposition of

surplus proceeds of sale. Disputes concerning properly submitted claims

will still be resolved by the United States within a reasonable time

after the redemption period. The Service solicits comments as to

whether the 30-day period after the date of redemption for a purchaser

to submit an itemized statement of excess expenses or to submit

additional excess expenses is adequate.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

a regulatory assessment is not required. It has also been determined

that section 553(b) of the Administrative Procedure Act (5 U.S.C.

chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do

not apply to these regulations, and, therefore, an initial Regulatory

Flexibility Analysis is not required. Pursuant to section 7805(f) of

the Internal Revenue Code, this notice of proposed rulemaking will be

submitted to the Chief Counsel for Advocacy of the Small Business

Administration for comment on its impact on small business.

Comments and Requests for a Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any written comments that are submitted

timely (preferably a signed original and eight copies) to the IRS. All

comments will be available for public inspection and copying. A public

hearing may be scheduled if requested in writing by a person that

timely submits written comments. If a public hearing is scheduled,

notice of the date, time, and place for the hearing will be published

in the Federal Register.

Drafting Information

The principal author of these regulations is Robert A. Walker,

Office of Assistant Chief Counsel (General Litigation). However, other

personnel from the IRS and Treasury Department participated in their

development.

List of Subjects in 26 CFR Part 301

Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income

taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 301 is proposed to be amended as follows:

PART 301--PROCEDURE AND ADMINISTRATION

Paragraph 1. The authority citation for part 301 continues to read

in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 301.7425-4(b)(3)(ii) is amended by revising the

third sentence and adding a fourth sentence to read as follows:

Sec. 301.7425-4 Discharge of liens; redemption by United States.

* * * * *

(b) * * *

(3) * * *

(ii) * * * If a purchaser or his or her successor in interest has

failed to furnish the written itemized statement within 30 days after

the request therefor is made by the district director, or there is a

disagreement as to the amount properly payable under paragraph

(b)(1)(iii) of this section, or if there were additional excess

expenses that were not claimed in the original itemized statement, the

purchaser or his or her successor in interest may submit a written

itemized statement to the district director within 30 days after the

date of redemption. If the purchaser or his or her successor in

interest fails to timely submit such a written itemized statement, no

amount shall be payable for expenses in excess of income.

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 94-12465 Filed 5-20-94; 8:45 am]

BILLING CODE 4830-01-U